This article originally appeared on CFO.com.

Many companies stumble in their financial planning. As just one example, consider how Peloton, the exercise equipment and training company, made highly optimistic consumer demand forecasts, assuming that the surge of demand during the COVID-19 pandemic would last. The problem was compounded by a gummed-up supply chain that deterred potential new customers.

Peloton’s planning wasn’t flexible enough to adjust quickly to changes in demand and supply. The result: a large new factory it will never use and has to sell, and a drop in market capitalization from nearly $50 billion in January 2021 to $3.3 billion in June 2022.

With the risk of a recession rising, companies in most industries will have their financial planning processes severely tested over the coming months. They’d do well to replace a fixed annual exercise with a flexible approach that responds to changing conditions. Traditional planning methods have caused firms to be caught flat-footed by external shocks, and unable to quickly adapt or reallocate money and other resources.

Those traditional methods create headaches for financial leaders. In a new Bain survey of 240 CFOs in the U.S. and Europe, respondents overwhelmingly cited financial planning and analysis (FP&A) as their top priority. A good FP&A team understands where money is made or lost across the business and helps senior leaders see around corners while illuminating the risks and opportunities within the organization and externally.

To do that, a company’s financial planning should excel in five outcomes: accuracy, timeliness, flexibility, innovation, and value. Consistently achieving high levels of these outcomes is hard, with only 13% of the CFOs in our survey saying they do.

To Go Beyond Budgeting

Beyond Budgeting, a framework developed as an alternative to traditional annual budgeting, helps companies cultivate dynamic financial planning. Beyond Budgeting originated in Europe in 1998 and has been embraced entirely or partly by a broad range of global companies, including Toyota, Danone, Maersk, and Handelsbanken. Beyond Budgeting consists of six leadership principles and six management processes.

In our survey, the 13% of companies that lead in key financial planning outcomes are twice as likely as other firms to adopt many of the principles and management processes of Beyond Budgeting. The gap between leaders and others is particularly large in a few key areas. To start, the leaders minimize hierarchical control and bureaucracy. Too many companies embed a lot of detail in the process of allocating resources, sometimes down to the department or manager level for operating expenses, or down to the individual project for capital planning. The leaders, by contrast, streamline the level of detail in planning.

Planning leaders also organize processes around business conditions and events rather than the calendar year. Some companies open access to funding outside of the annual plan, in order to fund innovation or “change the business” initiatives.

Planning leaders also excel in target setting. Many companies take the seemingly easy route of basing the next year’s target as a percentage over the current year. However, internally negotiated, fixed targets don’t work in dynamic situations. Instead, leaders set targets based on benchmarks linked to the business strategy, and they often separate target setting from planning and forecasting. This keeps them focused more on winning in the market than on hitting internal targets, and provides a realistic view of actual business performance.

New Looks for Planning

Companies can streamline the current planning process, augment it with new techniques, or reinvent the process. The first two can be effective in the short term, but for lasting benefits, some companies are pursuing entirely new ways of planning.

Amazon, for instance, has reinvented the budget process by putting customer priorities at the center. It allocates funding to activities, not business units, with each activity evaluated on how it affects customers. For each new activity, the owner creates a planning document that contains a future press release describing the benefits to customers. Unlike traditional management reviews that focus on financial metrics, Amazon’s reviews focus on real-time customer metrics.

Hilti, a Swiss manufacturer of building products for the construction industry, began shifting away from traditional budgets more than 15 years ago. Hilti first made many of its targets relative rather than absolute and linked its bonus system to progress toward these targets. It replaced annual budgeting with three rolling forecasts per year, each with only 100 line items.

Hilti’s performance management focused on comparing actual financial performance with a previous period’s performance against established targets. From 2011 to 2021, Hilti was able to adapt its financial planning amid disruption in the power tools industry, a global pandemic, and supply chain shocks, as revenue grew 1.5 times and net income by seven times over the period.

To improve planning, FP&A will need to add people from backgrounds other than accounting and standard MBA programs, such as data analytics and data science. That kind of talent can help extract the key business insights from data, rather than spend time manipulating spreadsheets. Blending the right processes with the right talent and technology to create truly dynamic financial planning will allow companies to adjust quickly and confidently to the shocks coming their way.